Travelers 2003 Annual Report Download - page 26

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• service programs, which are generally sold to Travelers National Accounts customers, where Travelers receives
fees rather than premiums for providing loss prevention, risk management, and claim and benefit administration
services to organizations under service agreements. Travelers also participates in state assigned risk pools as a
servicing carrier and pool participant.
Commercial Automobile provides coverage for businesses against losses incurred from personal bodily injury, bodily
injury to third parties, property damage to an insured’s vehicle, and property damage to other vehicles and other
property resulting from the ownership, maintenance or use of automobiles and trucks in a business.
Property provides coverage for loss or damage to buildings, inventory and equipment from natural disasters, including
hurricanes, windstorms, earthquakes, hail, and severe winter weather. Also covered are manmade events such as
terrorism, theft, vandalism, fires, explosions, storms, and financial loss due to business interruption resulting from
covered property damage. For additional information on terrorism, see “ – Terrorism Risk Insurance Act of 2002.”
Property also includes specialized equipment insurance, which provides coverage for loss or damage resulting from the
mechanical breakdown of boilers and machinery, ocean and inland marine, which provides coverage for goods in
transit and unique, one-of-a-kind exposures and miscellaneous assumed reinsurance.
Fidelity and Surety provides fidelity insurance coverage, which protects an insured for loss due to embezzlement or
misappropriation of funds by an employee, and surety, which is a three-party agreement whereby the insurer agrees to
pay a third party or make complete an obligation in response to the default, acts or omissions of an insured. Surety is
generally provided for construction performance, legal matters such as appeals, trustees in bankruptcy and probate and
other performance bonds.
General Liability provides coverage for liability exposures including bodily injury and property damage arising from
products sold and general business operations. Specialized liability policies may also include coverage for directors’
and officers’ liability arising in their official capacities, employment practices liability insurance, fiduciary liability for
trustees and sponsors of pension, health and welfare, and other employee benefit plans, errors and omissions insurance
for employees, agents, professionals and others arising from acts or failures to act under specified circumstances, as
well as umbrella and excess insurance.
Principal Markets and Methods of Distribution
Travelers distributes its commercial products through approximately 5,800 brokers and independent agencies located
throughout the United States that are serviced by approximately 80 field offices and two customer service centers. In
recent years, Travelers has made significant investments in enhanced technology utilizing state-of-the-art Internet-
based applications to provide real-time interface capabilities with Travelers independent agencies and brokers.
Travelers builds relationships with well-established, independent insurance agencies and brokers. In selecting new
independent agencies and brokers to distribute Travelers products, Travelers considers each agency’s or broker’s
profitability, financial stability, staff experience and strategic fit with its operating and marketing plans. Once an
agency or broker is appointed, Travelers carefully monitors its performance.
National Accounts sells a variety of casualty products and services to large companies. National Accounts also
includes Travelers residual market business, which primarily offers workers’ compensation products and services to
the involuntary market. National Accounts clients generally select loss-sensitive products in connection with a large
deductible or self-insured program and, to a lesser extent, a retrospectively rated or a guaranteed cost insurance policy.
Through a network of field offices, Travelers underwriting specialists work closely with national and regional brokers
to tailor insurance programs to meet clients’ needs. Workers’ compensation accounted for approximately 76% of sales
to National Accounts customers during 2003, based on gross written premiums and fee income. National Accounts
generated $330.7 million of service fee income in 2003, excluding residual market business discussed below.